Upbeat U.S. GDP Report to Fuel EUR/USD Weakness

Trading the News: U.S. Gross Domestic Product (GDP)

Updates to the U.S. Gross Domestic Product (GDP) report may fuel the recent decline in EUR/USD^[1] as the economy is expected to expand 4.2% per annum in the second quarter of 2018, which would mark the fastest pace of growth since 2014.

Data prints pointing to a robust economy may encourage the Federal Open Market Committee^[2] (FOMC) to adopt a more hawkish tone at the next interest rate decision on August 1, and Chairman Jerome Powell & Co. are likely to reiterate that ‘gradually returning interest rates to a more normal level as the economy strengthens is the best way the Fed can help sustain an environment in which American households and businesses can thrive’ as the central bank largely achieves its dual mandate for full-employment and price stability.

With that said, growing expectations for four Fed rate-hikes in 2018 may keep EUR/USD under pressure, but a marked slowdown in the core Personal Consumption Expenditure (PCE), the Fed’s preferred gauge for inflation, may produce a bearish reaction in the dollar as it curbs the FOMC’s scope to extend the hiking-cycle.

Impact that the U.S. GDP report has had on EUR/USD during the last quarter